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CA Intermediate · Auditing and Ethics · Completion and Review

In the audit of Bharat Steels Ltd, the auditor finds that uncorrected misstatements identified during the audit total Rs 6 lakh individually immaterial items, while overall materiality is Rs 25 lakh and the clearly trivial threshold was set at Rs 1 lakh. Under SA 450, what should the auditor do with the accumulated misstatements?

The auditor should communicate all accumulated misstatements, other than clearly trivial ones, to the appropriate level of management on a timely basis and request that they be corrected. Being below overall materiality does not remove this duty, and the auditor then evaluates the effect of any uncorrected items.

  1. ACommunicate all misstatements, other than clearly trivial ones, to the appropriate level of management on a timely basis and request correctionCorrect
  2. BDisregard them entirely since the total is below overall materiality
  3. CCommunicate only those misstatements above Rs 25 lakh
  4. DCorrect them personally in the books of the company

Explanation

SA 450 requires the auditor to accumulate misstatements other than clearly trivial ones, communicate them on a timely basis to the appropriate level of management, and request correction. Being below overall materiality does not remove this duty; the auditor also evaluates their effect, including in aggregate. The auditor does not make entries in the client's books.

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